May 2017

With fixed deposit interest rates on a downward trajectory, we tell you if it is time to look at other safe investment options to fetch better returns.

Fixed deposits are one of the most preferred investment options. This can be attributed to the fact that fixed deposits are relatively risk-free, offer reasonably good Fixed Deposit Interest Rates, have a fixed tenure and, finally, provide guaranteed returns at maturity. In addition, banks and some NBFCs allow you to withdraw your fixed deposit prematurely after a portion of interest is reduced as penalty.

However, the past two years have witnessed a declining interest-rate scenario where the fixed deposit interest rates have fallen around 2%. This has translated into a lower monthly interest income on Fixed Deposits. What’s more, with banks flush with funds post demonetisation, there are more funds to be lent to customers. This indicates a cut in the lending rate, a scenario that is preceded by a cut in the fixed deposit interest rates. Moreover, due to a fairly benign inflation outlook, easy liquidity and the strengthening rupee, the fixed deposit interest rates are expected to fall further. This is the right time for you to explore some smart investment options to fixed deposits, such as:

Post Office Savings Schemes (POSS)

The Post Office offers various low risk schemes, such as Recurring Deposit Account, Time Deposit Account, Monthly Income Scheme Account, Senior Citizen Savings Scheme, Kisan Vikas Patra and Sukanya Samriddhi Accounts. When you opt for these schemes, you generally get higher returns. In addition, there is no tax deducted at source (TDS) in these schemes. The Monthly Income Scheme Account is a good bet if you are a retired individual or have regular income needs, and so is the five-year National Savings Certificate (NSC), where you can start by investing as less as Rs.100. You can pledge NSCs as collateral to get loans.

Public Provident Fund (PPF)

PPF is a fixed-income, small savings schemes that is ideal if you are looking to build a tax-free retirement corpus. Those who do not have any investment plans for their retirement, such as self-employed persons and professionals, can opt for PPF. Investments in PPF will fetch an annual interest rate of 7.9%. The entire proceeds on maturity, including returns are tax free. Any deposits that you make are eligible for deduction on investments (up to Rs 1.5 lakh) under Section 80C of the Income Tax Act. Your PPF account matures after 15 years and you can renew it every five years thereafter. You can withdraw your investment made from the seventh financial year of opening the account.

Company Fixed Deposits (FDs)

Many companies offer small investors the facility to place fixed deposits with them. The companies offer varying fixed deposit interest rates as per the credit rating assigned by credit rating agencies— which indicates a company’s health—and their brand perception. The fixed deposit interest rates on company deposits is generally 2-3% higher than the fixed deposit interest rates offered by banks for similar periods. However, don’t be lured by high fixed deposit interest rates on corporate fixed deposits for better returns. Cautiously select the companies to invest in your hard-earned money, and invest in companies with AAA or at least AAA rating. This is important particularly in view of the fact that some companies, in recent years, have been found delaying the payment of interest and principal on their FDs due to financial problems or otherwise. You can consider investing in an FD with an NBFC, which has a good safety rating and offers a higher interest rate than banks.

Bonds
If you are looking to avail of some capital gains tax rebates or make a large investment, bonds are ideal fixed-income investment options. Bonds serve as an IOU between the issuer and the purchaser. As an investor, you loan money to an institution, such as a government or a company, and the bond serves like a written promise for paying back the loan on a specific maturity date. Bond purchases are generally considered to be secure investments, and government or highly-rated corporate bonds feature very little risk of default.

Debt mutual funds
Debt mutual funds invest in fixed income instruments, such as government bonds, that are generally considered safe. When there is a decline in the interest rates, bond prices rise. With interest rates trending down, debt mutual funds can help you get capital appreciation (from bond price rise). Thus, debt mutual funds have the ability to position themselves to benefit from falling interest rates. The tax is calculated on the basis of short-term and long-term capital gains. The dividend income earned from debt mutual funds is tax-free.Whether you are a conservative investor or are comfortable with taking some risk for better tax-efficient returns, Bajaj Finance offers fixed deposits with competitive interest rates and mutual fund schemes for your investment needs.

If you are standing at the crossroads, wondering what other and better investment option exists other than bank fixed deposits, then the answer is a company fixed deposit. A considerably higher company fixed deposit interest rate will fetch you a larger and attractive return. So be prudent by investing your household savings wisely.

What is bank fixed deposit?

A bank fixed deposit (FD) or term deposit allows you to deposit money for a fixed tenure like 6 months, 1 year, 3 years, 5 years, etc. Compared to your savings account, a bank fixed deposit earns a comparatively higher interest rate. Safety of principal and guaranteed investment return has made bank fixed deposit a traditional investment practice.

What is company fixed deposit?

As an investor, you can deposit money with companies, corporates or NBFCs for a fixed tenure with prescribed company FD interest rates. An investment trend with multiple benefits, a company FD offers high interest but it is advisable to look into the pedigree and profile of the company before investing.

Bank fixed deposits Vs. Company fixed deposit:

You must have observed how banks have diminished their fixed deposit interest rates over the years. This dip in interest rate has prompted investors like you and me to scout for better alternatives other than a bank fixed deposit. A fluctuating bank FD interest rate is sure to induce worry while rapid plunges in interest rates is a major concern for any investor. As an investor, your main objective while investing is to earn a good return. Company FD interest rates are much higher than bank fixed deposit rates. Their schemes offer special interest rates for senior citizens, shareholders, company employees, etc. Company fixed deposit offers little to no volatility. Any up and down in the market or an upheaval in the economy will not affect your company fixed deposit. If you are a conservative investor, then bank fixed deposit will most likely work for you. On the other hand, if you are looking for that extra edge in your FD investment return, then company fixed deposit is a possible investment option for you with greater returns. The only thing for a prudent investor to do is to look into the CRISIL or ICRA safety rating of a company FD and make sure it is stable and safe.

Fixed deposit with Bajaj Finance Limited:

If you are a keen investor with an open mind who wants to pump up your investment portfolio, then Bajaj Finance’s fixed deposit schemes are just for you. You can opt for FD interest pay out as cumulative or non-cumulative.

Advtanges of FDs offered by Bajaj Finance Limited:

Higher company FD interest rates for senior citizens:
An additional interest rate as high as 0.25% more than the average is offered to senior citizens. Not only is their life savings and hard earned money secured, but the added benefit of 0.25% extra interest makes a whole lot of difference.

A lucrative investment option:
You no longer have to rely on mediocre fixed deposit interest rates as a minimum FD interest rate of 7.85%can soar to a maximum of 8.10% depending on the investor type. What’s more, your fixed deposit tenure can vary from 12 months to 60 months.

Stability, credibility and reliability:
Company fixed deposit schemes with Bajaj Finance Limited has earned excellent approval ratings from leading financial institutions such as ICRA and CRISIL.

Easy access:
You can apply easily through online registration. As an investor, you can manage your FD investments online too. Also there is a huge network of FD service available across 200 plus cities in India, which gives you eay access to information on your investment.

Minimum deposit of Rs.25,000
It is a known fact that higher the sum invested, higher is the investment return. Bajaj Finance offers the flexibility to begin investing in company fixed deposit with a mere 25,000.

Fixed deposit calculator:
Bid goodbye to guess work. With an FD calculator you can smartly determine and compare the maturity amount with different tenures and different company FD interest rates correctly and conveniently to make the best investment.

In a world of seemingly endless investment products, we explore the importance of including Fixed Deposits in your portfolio.

As most seasoned investors will tell you, when it comes to investing, diversification is essential. Both in terms of spreading your risk as well as earning a healthy return, it is advisable to spread your bets keeping in mind your particular financial goals.

The most commonly discussed investment options include Fixed Deposits , equity and debt, each of which are different in terms of risk and return. It is advisable to spread investments across all these asset groups in differing proportions, with asset classes such as equity being associated with the potential for higher returns due to higher risk and FDs being considered a far safer, more secure option to earn stable returns.

Aside from your personal risk appetite, your spread and allotment of investmentsacross these asset classes such may well be influenced by market conditions. During times of economic uncertainty (such as during major elections), people tend to gravitate more towards fixed deposits. Similarly, during a booming economy people are more ready to take risks and therefore may favor equity investments.

Aside from this, there is a range of factors that impact how appealing a Fixed Deposit account may be the right investment for you. These could include:

Risk appetite: FDs are seen as far safer investment option than equities and therefore would be ideal for the risk-averse investor looking to earn a fixed return and make the most out of their idle funds.

Safe and secure Beyond the safety of lower risk, Fixed Deposit accounts in banks are also insured by the Deposit Insurance Credit Guarantee Corporation. So if a given financial institution fails, your money is still secure.

Regular incomeUnlike unstable and uncertain dividends issued by companies, FD interest is fixed. This allows for easier financial planning as, even if the rates increase or decrease after opening your Fixed Deposit account, your rate of interest will not be affected.

Easier access to borrowingYou can offer your FD as collateral when applying for a loan which is particularly helpful for those who may not have other assets to offer as collateral when applying for a loan. While your FD continues to earn interest, the rate of interest for the loan will be a slightly higher than that of the FD. This type of loan therefore, works out cheaper than any other type of loan, since the bank has the comfort of knowing it can claim your deposit if you fail to repay the borrowed amount.

Drawbacks:

FDs also have their drawbacks. These include:

Keeping up with inflation: Investing in FD only makes financial sense if the rates offered are above that of inflation so the real value of your money doesn’t erode.

Tax liability: Interest earned on an FD is taxable, which can be intimidating for investors, particularly those in a higher tax bracket.

In the end, the best option for you is to go for investments that best suit your personal goals. Having said that, having some funds parked in Fixed Deposits is always advisable as many companies such as Bajaj Finance offer attractive rates of return.

Even though FDs are a safe investment choice, that doesn’t mean to forget to revisit them. Regular monitoring can help double the income you generate from FDs.

Are you a serious medium to long-term investor looking to generate a reasonable income on your fixed deposit investments? You must keep an eye on your fixed deposits for better returns. This does not mean undertaking an accurate evaluation of your fixed deposit performance, since you will earn returns at a guaranteed or fixed rate offered by the lender till the end of the tenure. Rather, you need to keep track of your fixed deposits at the time of maturity.

Here’s Why:

Forgetting Can Cost You Dearly:

Sunil Pawar, a school teacher from Mumbai, had invested Rs.30,000 in a fixed deposit with a bank in 2010. His deposit matured in 2015, but he forgot all about it. He finally woke up and remembered about his investment only in 2017. He approached the bank, but found that they authorities were unable to locate the records relating to his fixed deposit. He had no choice but to approach the banking ombudsman to get his investment back. Though he got his money back, he lost out on the interest he would have otherwise accumulated. When you fail to keep track of your FDs, most likely the bank will dispose your old records. You also incur losses on returns by keeping your money stagnant for long.

Auto Renewal FD:

When you invest in a fixed deposit, you can choose to either take the maturity amount as a lump sum at the end of the tenure or ask the bank or lender to automatically renew it. This does away with the hassle of you trying to remember the date your FD matures, and also ensures that you don’t lose out on the interest on maturity of your fixed deposit.

The Limits of Auto Renewal:

Auto renewal may not always be a good idea, especially if you are looking for higher interest rates. If you fail to provide the relevant instructions, your fixed deposit will be auto-renewed at the prevailing interest rate for the same term. Opting for auto renewal could make you miss out on opportunities to earn a better rate from other banks or NBFCs.

Opt for Direct Credit:

Consider going for direct credit of your fixed deposit maturity amount to your savings bank account. As the final proceeds are directly deposited as lump sum in your savings account, this eliminates the need for filling in more papers to claim your maturity amount, which you can utilize to open another FD with a tenure you are comfortable with.

How to Monitor and Track Your Fixed Deposits For Better Returns?

To monitor your fixed deposits, make sure to check the calendar you have marked in advance (a physical calendar or a digital one on your phone or laptop) with the maturity dates of your investments. Another good idea is to set a reminder in your smartphone on the due date. This would allow you enough time to approach other banks or NBFCs for better alternatives and even help you decide to switch to another term when your deposit matures.

Repo Rate Changes:

Fixed deposits are not susceptible to volatility however, banks, and other lenders too, charge fixed deposit interest rates according to the RBI repo rate. With frequent changes in the repo rate and other policy changes, the interest you get varies every quarter of the financial year. And since these changes are frequency of changes in fixed deposit interest rates is on the rise, it is crucial that you monitor your fixed deposits periodically.

Auto Renewal Procedure You Should Be Aware Of:

If you have opted for auto renewal on your fixed deposit for better returns, you can change the mandate before the maturity date. But what if you want to break your auto-renewed fixed deposit after the maturity date? You will not only have to forego the extra interest accrued, but also pay a premature withdrawal penalty.

Make your FDs earn more by regularly monitoring the interest rate and the FD maturity date. Look for higher interest rates to make your money grow in a safe environment. Bajaj Finance, for example, provides fixed deposit schemes with an easy application and documentation process at a high rate of interest.

A fixed deposit is a safe investment to secure your future, and compared to any other investment the risk factors of fixed deposit are the least. However having a clear fixed deposit strategy is essential if you want to maximize your earnings. Here’s what you need to know.

With falling inflation and the RBI insisting on lower interest rates to fuel growth, interest rates for fixed deposit are likely to fall in the coming months. Right now, investors have a ripe opportunity to invest in long term fixed deposits.

Why Choose a Fixed Deposit?

Investing in a fixed deposit is the ideal strategy for anyone who is looking to lock funds with no to very low risk. This investment also allows the investor to have easy access to the invested amount in case of an urgent requirement of cash on short notice. Today, opening a fixed deposit account is easy and the same can be applied for, approved and managed online without ever having to step outside your house.

While it is easy to understand why a fixed deposit is a good investment, you should also consider the following factors to develop a beneficial fixed deposit strategy:

Pay Attention When The FD Is Started:

While a fixed deposit provides both short term and long term deposit options, you need to keep your financial goals in mind. In a fixed deposit, an investor has the possibility to lock his/her investment for a long term at a predetermined rate of interest. With the interest rate already determined and the return confirmed there is no need to check the growth in the fixed deposit account. In fact, it works best if the same is forgotten about. For example, suppose you choose a 5-year deposit at 8% interest per annum. Once chosen at the time of opening, the fixed deposit will remain the same until the maturity of the deposit. Interest rate fluctuations in the market once your FD is opened do not change or affect the rate of interest on the existing fixed deposit.

Check The Term of Deposit to Maximize Interest:

In the case of fixed deposits, a two to three-year term is considered a long term investment. However, in the current market scenario with the interest rates expected to decrease slightly, it may be prudent to change your fixed deposit strategy for a longer period of five to seven years. It is important to consider the anticipated future market when finalizing the term of the fixed deposit. In case you choose a shorter term of the deposit and the prevailing interest rates on maturity are lower then you will be forced to reinvest at a lower rate of interest.

Know The Taxation Laws Pertaining to Your Interest Earnings:

Earnings from fixed deposits are taxed at the income slab of the investor. There is no special treatment for interest earned from fixed deposits. Further, your chosen lender’s branch is required to deduct TDS at 10% if the interest from your FD exceeds Rs.10,000 in a year. For this reason many investors divide their deposits between two or more branches of the lender.

Be Aware of Interest Rates and Outlook of Various Lenders:

It is important to note that the FD interest rate varies with the term of the fixed deposit. It is necessary to be careful in selecting the term of the fixed deposits. The interest rates offered by every bank, NBFC or financial institution varies depending on factors such as the lender’s liquidity, its requirement of funds for the term of the fixed deposit selected as well as the interest rates offered by the competition.

Keeping these 4 tips in mind, you can plan your FD account/s to generate the maximum return while ensuring that the investment is safe. While many banks and NBFCs offer fixed deposit accounts, take a look at the interest rates and services offered by Bajaj Finance Limited. They offer a hassle-free online application and require minimal documentation to start a Fixed Deposit account for you. They also have competitive FD interest rates to ensure that your money grows.

After completing his medical studies, Dr. Karan George returned to his hometown to start his own medical practice. While he had the property, he had limited funds for medical equipment and hiring employees. To overcome this issue, Dr. Karan decided to mortgage his ancestral property for a loan.

Mortgaging your property to set up or expand your business is commonly known as Loan against Property (LAP).

Let’s look at the features and benefits of loan against property (LAP):

Features of Loan Against Property:

With LAP, you could mortgage either your residential or commercial property. You could get up to 70% of your property value as loan. If your property value increases during the loan tenor, you could even apply for a top-up amount.

The loan tenor is usually between 5 and 15 years. During this tenor, you can make a partial repayment. Also, if you get a huge bonus, you could easily foreclose the loan as well.

Additionally, if the property is co-owned, the co-owner could also become a co-applicant. The ownership of the property remains with you. However, please note that in a case of default, the ownership will get transferred to the lender.

There are so many ways to compare investment options to find one that’s right for you. It can become quite a daunting task when making a decision on which company or financial institution to opt for based on rates, service, transparent costs, eligibility criteria, etc. Trusting vast sums of your own hard-earning money to a bank or NBFC can make you uneasy and anxious. It is therefore paramount that you feel comfortable with whom you choose, and trust them to make your money grow. It is at times like these that CRISIL ratings prove extremely useful.

What is a CRISIL rating?

CRISIL, which used to be the Credit Rating Information Services of India Limited, is today the largest full service ratings agency in India and a pioneer in credit ratings in the country. It is tasked with rating a wide range of debt instruments, deposits, loans, asset back securities and many more. The agency serves a wide array of groups ranging from investors, lenders and regulators, to name a few.

CRISIL plays an invaluable role in assisting both borrowers and lenders by bridging the information gap between the two, thus allowing for a more transparent system. CRISIL ratings are also only limited to debt instruments only and therefore aren’t of use when assessing equity investments.

How does it affect me?

In terms of Fixed Deposits (FD) , CRISIL assigns a rating to those companies and banks that issue Fixed Deposits, which denote their credit worthiness. Thus its ratings provide investors with the confidence in terms of how safe and secure their funds are.

The table below denotes the various specific ratings given to a Fixed Deposit:

These ratings are considered a sign of a FD’s credibility, which is essential information for any investor. These are nothing short of a grading for how safe your invested funds would be. Therefore you should only opt for fixed deposits rated FAA and above if you are someone who is looking for the lowest risk possible. For those more willing to take on more risk, the CRISIL ratings can assist you here too.

What you will typically find is that issuers or lenders who have lower CRISIL ratings offer higher rates of interest due to the higher risk you are taking, which follows the basic rule of investing. The CRISIL rating is a key indicator, which tells you about the issuer’s repayment capacity based on their history, allowing you to make an informed decision about your investment.

Therefore knowing how CRISIL ratings function and how to assess them when comparing various fixed deposit options is essential knowledge. These ratings ensure that you have as much information as possible when deciding who to entrust your hard-earned savings.

There are two things that every motorcyclist yearns for: Power and mileage. Similarly, investors look for two things in their investments: liquidity and returns. Both these groups struggle to have their cake and eat it too. Investors have to compromise to get a fair amount of liquidity with inflation-beating returns. Here are a handful of tips that can show you how you can extract the most on your Fixed Deposit (FD) returns.

Appetite for risk:

How willing are you to drive your motorcycle at its maximum speed? How far you’re willing to go depends on your past experiences as a motorcyclist. It’s no different when you’re an investor. Your desire to take on uncertainties is subdued in proportion to the damages that have hit you. The losses you incur also dictate how your assessments are going to take shape. To increase you Fixed Deposit returns keep in mind that success and failures are good teachers. If you have made good returns on an FD with a low stability rating of an agency like CRISIL, you may want to invest in more such FDs; however, if safety is more important than the thrill of high returns, stick to investing in FDs with the highest safety rating.

Returns:

The figures preceding the percentage signs boggle everyone. Are the interest rate on FDs dependent upon the economy? The returns you gain depends on the type of investment, which in turn is susceptible to a host of factors such as volatility, government regulations, etc. Equity, gold and real estate are the most affected by volatility. One of the many investment tips to pursue is that irrespective of the time horizon your fixed deposit returns should beat the prevalent rate of inflation. At interest rates ranging from 7.85% to 8.10% Bajaj Finserv’s FD returns counter any adverse effects you may face from changes in the consumer price index (CPI), which is an accepted standard of measuring inflation.

Lock-in period:

Keeping your money locked in means you compromise on liquidity. Fixed Deposit returns are higher than what you get in a savings account because of low liquidity. It is therefore not a prudent investment tip to abruptly liquidate your FD unless you have good reason to do so. There may of course be times when you do need the money to meet some expense but you do not want to liquidate your Fixed Deposit on a whim. Bajaj Finance helps you overcome this predicament by offering you a loan against your Fixed Deposit three months after starting one.

Taxation:

Besides inflation, taxation is also a key factor to consider. There are several investment tips on how you can reduce the tax pressure on your bottom line and ramp up the yields on your FDs. Knowing about TDS levied at 10% on a minimum interest earning of Rs.10,000 is another investment tips everyone with a Fixed Deposit must be aware of.

Investment horizon:

Do you want to stay invested for the long term or the short term? The standard norm is anything less to a year is considered short term and anything over an year and above is considered long term. But the long and short of an investment as far as the time factor goes is not always clearly visible on the horizon. Depending on what your objective is even five years could be considered a short period. In other words the investment horizon you opt for will be a function of your future requirement. As a proven investment tip, never forget what constitutes a reasonable investment horizon varies subjectively with no yardstick that suit all.

Age:

Remember we said that motorcyclists appetite for risk depends on their past experiences. Their willingness to take on a risk is also inversely proportional to their age. The same is the case with investors. You are most likely to accept more challenges concerning your money when you are much younger because you have age on your side. But not everyone’s age accords them this privilege and for those who have age on their side today, they won’t have it tomorrow. Safety is prime when you plot where you lie on the chronological scale.

Source of income:

Motorcyclists need fuel for their vehicles and investors need income to meet their goals and objective. The source of income should be not only being steady, but also regular. Unlike those who are self-employed, salaried individuals have a set timeline when it comes to income and pay dates. However, getting a salary every month is no indication of stability. So both self-employed and salaried investors should create multiple sources of income to tide over such eventualities.

More mouths to feed? Though the saying:

A small family is a happy family’ once adorned family planning billboards, it has wide implications in the investment world too. Having more mouths to feed means you have to add more income. When you have parents and children dependent on you, every rupee you invest occupies your attention making you less likely to undertake any financial adventures.

Financial education: In this day of information overload another investment tip is that it is not only important for you to know but also revise what you know. So keeping yourself updated and knowing why yesterday’s myth has become today’s fact will make loads of difference on how your fixed deposit returns fare.

Progress charts:

Change is the only constant. Like everything else in life, the financial world you live in is also subject to flux. What holds true of your investment today does not hold good tomorrow. Do not be impressed by charts that show investment in a certain instrument consistently generated phenomenal returns for the last five years. Investment tip: Ask your agent as well as yourself whether this will really be the case in the next five years. Remember, no one can predict the future. The past can help you learn; it does not always help you earn.